The iPod Car

By Richard Menta 12/18/05

Is the iPod Car coming? This is not a rumor, it is just a prognostication of what I think is inevitable. I'm not talking about the dock options that some auto manufacturers have already created to allow the iPod to integrate with existing sound systems. I am talking about the sound system itself, one that is designed and built by Apple.

I can't say if Apple has a prototype already on Steve Job's desk or if they even thought of a design yet. For all I know Apple has already dismissed the idea. What I can say is that biggest unexploited market segment is wide open and that is the delivery of a factory-installed in-dash MP3 audio system.

The 30GB iPod Video is available on Amazon

Business case for the iPod Car

Recently Saturday Night Live poked fun at the iPod by highlighting that player's ever shrinking size to the point of the ridiculous (the iPod Invisa, it holds 8 million songs and is so small you can't even see it). The skit made its point clear, there is only so much mileage that can be attained by reducing size and inflating capacity. Eventually the market will flatten out.

When that happens (and its inevitable) MP3 players will become a mundane, common product. What comes with mundane common products are low prices and slim margins, not exactly Apple's product goals. So what does Apple do for its next generation iPods? How does it keep it vibrant? Does it add more features to the line and hope that's enough to keep its dominant market share? I say Apple will grow the iPod brand by building up new markets with high growth potential, building them like it built the small MP3 portable market into this year's top Christmas gift. Enter the iPod Car.

The automobile market is the market that offers Apple the biggest potential. Many of us listen to music in our cars more than we do in our homes, particularly those with a daily commute. Last January I released my Digital Media Wish for 2005. In that article I identified a factory-installed iPod in-dash unit as one of my objects of desire. Call it wishful thinking, but then as a consumer any object I wish for is an object I am a potential customer for. I wrote:

Apple's recent deal with BMW (to integrate an adapter that allows the portable iPod to connect to the Bimmers audio system) means they have definitely thought about an in-dash unit. Are they actually designing one?

It's possible. An iPod Car is compelling, certainly as compelling as satellite radio. Both XM and Sirius have successfully penetrated this market and it only makes sense that Apple follows them before someone else does. This is critical, because the automobile industry is not quick to change proprietary technology once they commit to it. The first MP3 maker to penetrate this market successfully will enjoy long-term prosperity.

Apple wants to embed its proprietary standards into the auto market. Along with iTunes and its FairPlay paid-download format the iPod's dock connector has become the default standard for all digital music peripherals. So concerned is Microsoft over this connector it has organized a working group through the Consumer Electronics Association (CEA) to design a new one. That group already has over 40 members and says it is committed to complete a new connector by next summer. When that happens Apple will have competition for the dashboard.

Apple does not want to see the iPod connector lose out to another standard like it witnessed FireWire lose to USB 2.0. There is another proprietary standard to protect too, Apple's video. Look at all the SUVs on the road today that are filled with kids watching an onboard video system. The iPod Car could offer a version with video, one that utilizes Quicktime and H.264 downloads as a way to offer fresh content to complement the family DVD collection.

The factory-installed game is not an easy one to break through. It's not good enough for GM or Toyota to have a product that can make them additional profit on a vehicle. The product itself has to be a draw, offering another reason to trade in the old car for new. The iPod name absolutely offers that draw. But does Creative? Maybe this is a plan for a company already in this market like Bose? It certainly has to be a company with stable financials and plenty of cash holdings in the bank. Last year iRiver said they were entering this market, but I have not seen anything from them yet.

There are companies that make aftermarket Digital Audio Car (DAC) units like PhatNoise with their PhatBox product, but to the best of my knowledge none of them have broken into to the factory installed market. Apple is in prime position to be the first. So if Apple comes up with an iPod Car, what will it look like?

Enter the iPod nano

My father owned a 1979 Ford Thunderbird. The factory-installed radio had FM, AM and a big gaping hole in the faceplate to accommodate the 8-track tape, a format already in decline. For those who have never seen an 8-track tape it was bigger than today's full size iPod. The hole was huge and ugly, not something today's consumers would find acceptable.

Today's consumers will accept small holes though. That's where the iPod nano comes in. The iPod Car in my mind will have a slit that plays standard CDs. It will also have a second slit that will accommodate an iPod nano.

It is the nano's slim profile and reasonably high capacity that makes it ideal for the dashboard. Yes, Apple could create a unit that accepts the standard iPod, and the new iPod with video may be slim enough, but a slot needed to accept the larger iPod would be more noticeable.

The nano presently hold up to 4GB of music and an 8GB version is probably coming by summer. As the capacity of flash memory becomes greater and its costs drop, hard drives like those on the standard iPod will be replaced by them. The trick is to design a low profile connection that, within reason, can accept future iPods whatever dimensions they may take.

Because of its high capacity a player like the nano offers a convenient tool to transfer songs from the PC to the car, which will have its own hard drive/flash memory storage. The iTunes software can easily embed multiple playlists into the nano, one for the nano and one for the iPod Car, to keep track of which files are on which units. Possessing its own storage makes sense for an iPod Car not just for convenience, but as protection in case the iPod nano gets lost or damaged.

So the big question is can Apple succeed in the automobile market? The iPod came late in to the MP3 player market and dominated it quickly, despite the fact that it was a completely new market for Apple. XM and Sirius are succeeding and there is no reason to think that Apple wouldn't too.

The biggest obstacle facing Apple is the limited real estate available on new dashboards. There is only so much room, which is why an iPod car will most likely have an AM/FM radio as well as a CD (A CD that can burn to a hard-drive in the iPod Car? Cool thought). This might also give Apple impetus to partner with one of the satellite companies to create an all in-one-product. It is quite possible that an iPod Satellite will appear, but as a premium version of the iPod Car. The possibilities here are considerable.

One last point, I was wondering if Apple might just sell an iPod Car direct to consumers, going the after market route rather than factory installed. They might, but the installation of audio equipment for the car is not always for the faint-of-heart. Apple would only be limiting its market by not going through the auto manufacturers.

Ohhhhh crystal ball, is there an iPod Car in the future? I can see an image appearing....

Other MP3 stories:
Creative Zen Vision M
iPod Killers for Christmas 2005 Part I
iPod Killers for Christmas 2005 Part II
iPod Killers for Christmas 2005 Part III


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